I've been anticipating a strong chance of a double dip (at least in housing) ever since I first saw this chart (no later than Oct 2007): http://www.calculatedriskblog.com/2007/10/imf-mortgage-reset-chart.html
On the other hand I smell a boomlet shaping up in more affluent markets. More divergence into Two Americas. But then it has never been particularly illuminating to look only at broad averages of economic data.
Ruh-Roh? Thanks for the dictionary link. Even I--"Mr. Super American" had never heard of that phrase. But let's talk states here-in the US that is.
Oregon officially has a 12% unemployment rate if government figures can be believed. But in reality it is more likely 20%. Hynix packed up and left, motorhome production vanished, lumber sales have disappeared (except for exports) and those in the construction trades are wandering around in a state of shock. Many unemployed have simply fallen off the charts as they officially don't count anymore under the current definitions of being unemployed. They are surviving somehow on cash and barter or going to illegal means in the underground economy. But that also means they can't qualify for a mortgage loan and perhaps not even qualify to rent a house unless the landlord goes more on gut instinct than contractual protocol. It's ugly and is getting worse.
And I wonder how many can regain (legal and taxed) employment unless something I cannot foresee transpires. Manufacturing (actually making something) is still the greatest source of wealth generation. I've read somewhere that the US is still the worlds largest manufacturer in absolute terms. Is that true? Methinks the barter and cash economy is and will continue to be on the rise.
Housing is still badly overpriced in many parts of America. Another 10-20% fall and the nation will be much better positioned to see an economic expansion.
If the financiers who drove the prices up ever are allowed to fail, the national will be much better positioned to see an economic expansion, too.
I was an astonishing figure in the media somewhere that twenty(!!!) percent of all the houses in Florida are currently unoccupied. Meanwhile, it wouldn't much surprise me if a pretty good fraction---maybe even twenty percent---of all the families in Florida were doubling up with relatives or otherwise "under-housed." This sort of thing reminds me of the late-1980s stories out of the USSR that we always used to snicker about.
Considering that the banks having been playing all sorts of games with their mortgage-loan inventory over the last couple of years and refusing to recognize the vast majority of their likely losses, a housing double-dip always seemed an expected scenario to me.
"the financiers who drove the prices" - when an obese person passes by the salad bar, and instead fills up their plate with french fries, is it the restaurant owner who is responsible for them being fat? However, I agree that when people realize that french fries are unhealthy, we should let restaurants go bankrupt when they can't afford the payments on their fry-o-laters.
"it wouldn't much surprise me if a pretty good fraction---maybe even twenty percent---of all the families in Florida were doubling up with relatives or otherwise "under-housed." This sort of thing reminds me of the late-1980s stories out of the USSR that we always used to snicker about."
That might not be necessarily negative RKU- were it to transpire. But Americans are indeed spoiled and used to having great space and infinite things (many IMO unnecessary--but once thought to be irreplaceable) at their beck and disposal. I include myself in this. Having USA'ers forsake that and then having the rest of the world catching up (the Great Leveling) is going to be an amazing event for me to witness. It will happen. Question remains when &--will I live that long?
hear hear! let's hear somebody explain that to millions of Americans who lied on their mortgage applications! I think the 10's of thousands of bankers have heard the message ... But in defense of both, the government of the U.S. was also acting to promote "home ownership" - and therein lies blame as well ... by the 1980's home ownership in the U.S. was about as high as it reasonably could be but ... noooooo ... like with gdp it became something that had to be grown ....
side note: american obsession with home ownership has its roots in people being unable to pay rent during the great depression ... unfortunately, a 30 year exploding variable rate mortgage was not the thing that depression era dreamers had in mind as "home ownership" .... people really owning their homes is a good thing, mortgages are not ...
I was referring to your restaurant example, but I suspect there really was a communication gap between originators and CDO underwriters, but maybe not. Maybe the banksters were evil not just stupid. You should know.
My guess is that everyone in the chain: the borrowers, originators, servicers, underwriters, ratings agencies, and purchasers, all knew what they were doing. But all were under the spell of the real estate bubble.
Oh, and the government was under the spell too. TARP was not passed as a bank bailout program. The idea there was that a lack of demand for mortgage bonds was driving real estate down, so the congress thought $700 billion of additional bond buying would prop up the bond market, thus propping up real estate, thus bailing out underwater home owners. But the money was never used that way since Timmy G and Benny B awoke from the spell.
Is anyone really surprised?
ReplyDeleteWill a double dip in housing cause a double dip recession?
ReplyDeleteI've been anticipating a strong chance of a double dip (at least in housing) ever since I first saw this chart (no later than Oct 2007): http://www.calculatedriskblog.com/2007/10/imf-mortgage-reset-chart.html
ReplyDeleteOn the other hand I smell a boomlet shaping up in more affluent markets. More divergence into Two Americas. But then it has never been particularly illuminating to look only at broad averages of economic data.
Ruh-Roh? Thanks for the dictionary link. Even I--"Mr. Super American" had never heard of that phrase. But let's talk states here-in the US that is.
ReplyDeleteOregon officially has a 12% unemployment rate if government figures can be believed. But in reality it is more likely 20%. Hynix packed up and left, motorhome production vanished, lumber sales have disappeared (except for exports) and those in the construction trades are wandering around in a state of shock. Many unemployed have simply fallen off the charts as they officially don't count anymore under the current definitions of being unemployed. They are surviving somehow on cash and barter or going to illegal means in the underground economy. But that also means they can't qualify for a mortgage loan and perhaps not even qualify to rent a house unless the landlord goes more on gut instinct than contractual protocol. It's ugly and is getting worse.
And I wonder how many can regain (legal and taxed) employment unless something I cannot foresee transpires. Manufacturing (actually making something) is still the greatest source of wealth generation. I've read somewhere that the US is still the worlds largest manufacturer in absolute terms. Is that true? Methinks the barter and cash economy is and will continue to be on the rise.
Good news!
ReplyDeleteHousing is still badly overpriced in many parts of America. Another 10-20% fall and the nation will be much better positioned to see an economic expansion.
If the financiers who drove the prices up ever are allowed to fail, the national will be much better positioned to see an economic expansion, too.
I was an astonishing figure in the media somewhere that twenty(!!!) percent of all the houses in Florida are currently unoccupied. Meanwhile, it wouldn't much surprise me if a pretty good fraction---maybe even twenty percent---of all the families in Florida were doubling up with relatives or otherwise "under-housed." This sort of thing reminds me of the late-1980s stories out of the USSR that we always used to snicker about.
ReplyDeleteConsidering that the banks having been playing all sorts of games with their mortgage-loan inventory over the last couple of years and refusing to recognize the vast majority of their likely losses, a housing double-dip always seemed an expected scenario to me.
"the financiers who drove the prices" - when an obese person passes by the salad bar, and instead fills up their plate with french fries, is it the restaurant owner who is responsible for them being fat?
ReplyDeleteHowever, I agree that when people realize that french fries are unhealthy, we should let restaurants go bankrupt when they can't afford the payments on their fry-o-laters.
I think the "housing price tail" is no longer wagging the "broader economy dog".
ReplyDelete"it wouldn't much surprise me if a pretty good fraction---maybe even twenty percent---of all the families in Florida were doubling up with relatives or otherwise "under-housed." This sort of thing reminds me of the late-1980s stories out of the USSR that we always used to snicker about."
ReplyDeleteThat might not be necessarily negative RKU- were it to transpire. But Americans are indeed spoiled and used to having great space and infinite things (many IMO unnecessary--but once thought to be irreplaceable) at their beck and disposal. I include myself in this. Having USA'ers forsake that and then having the rest of the world catching up (the Great Leveling) is going to be an amazing event for me to witness. It will happen. Question remains when &--will I live that long?
It's not an either/or LY. Both are morally responsible.
ReplyDeleteBut in reality it is more likely 20%
ReplyDeleteIf someone loses his job as an engineer and then gets a job making sandwiches is he employed?
According to government stats, yes.
Unemployment in the sense of not having a job or not doing a job which creates more than it destroys is 80%.
hear hear! let's hear somebody explain that to millions of Americans who lied on their mortgage applications! I think the 10's of thousands of bankers have heard the message ... But in defense of both, the government of the U.S. was also acting to promote "home ownership" - and therein lies blame as well ... by the 1980's home ownership in the U.S. was about as high as it reasonably could be but ... noooooo ... like with gdp it became something that had to be grown ....
ReplyDeleteside note: american obsession with home ownership has its roots in people being unable to pay rent during the great depression ... unfortunately, a 30 year exploding variable rate mortgage was not the thing that depression era dreamers had in mind as "home ownership" .... people really owning their homes is a good thing, mortgages are not ...
ReplyDeleteI was referring to your restaurant example, but I suspect there really was a communication gap between originators and CDO underwriters, but maybe not. Maybe the banksters were evil not just stupid. You should know.
ReplyDeleteMy guess is that everyone in the chain: the borrowers, originators, servicers, underwriters, ratings agencies, and purchasers, all knew what they were doing. But all were under the spell of the real estate bubble.
ReplyDeleteOh, and the government was under the spell too. TARP was not passed as a bank bailout program. The idea there was that a lack of demand for mortgage bonds was driving real estate down, so the congress thought $700 billion of additional bond buying would prop up the bond market, thus propping up real estate, thus bailing out underwater home owners. But the money was never used that way since Timmy G and Benny B awoke from the spell.
ReplyDelete